By Andria Cheng

Borderfree

Thanks to overseas shoppers’ growing appetite for American goods, from mattresses to clothing, Borderfree, which helps retailers and brands sell their goods internationally online, has aroused the attention of investors.

Founded in 1999 originally as a patented foreign exchange technology software company to help retailers settle overseas online transactions, the company has expanded into helping U.S. retailers and brands handle localization of their websites, calculate duties, taxes and currency exchange rate that an overseas shopper needs to pay at online checkout. Why? It noticed in 2008 that about 20% to 25% of retailers’ average Internet traffic was coming from overseas, but most of them didn’t have the ability to “monetize” the significant amount of traffic.

The gross volume of online retailers’ sales has risen every year to $447.8 million in 2013 from $4.7 million in 2008. The company, which says it can handle transactions in more than 100 countries and more than 60 payment currencies, takes a cut of retailers’ sales — at the high end, it takes 12% for some smaller retailers. The percentage it collects drops for retailers that generate larger sales volume, said Chief Executive Michael DeSimone.

“There’s still tremendous room for growth,” DeSimone said in an interview. “E-commerce around the world is nowhere near as penetrated as (demand) is. There’s massive opportunity.”

DeSimone said that among the top 500 Internet retailers in the U.S., it only has 60 of them and sees 271 others within the pool as “good prospects.” Borderfree also has been contacted by European retailers interested in selling their online wares to markets like Latin America and Asia. It’s also developing software to allow it to serve small and mid-sized customers interested in selling abroad, he said.

International consumers are expected to spend $24 billion this year on physical goods from U.S. online retailers, the company said in a regulatory filing, citing a study Forrester Research conducted on its behalf. Forrester projected the market to grow at a compounded annual rate of 17% to $44 billion in 2018 the next five years. That far outpaced a 6% annual growth rate IDC forecast for the online U.S. sales of physical goods, Borderfree said. It cited IDC data and said there were about 790 million consumers outside of the U.S. that are potentially addressable by U.S. retailers.

However, opportunities aside, Borderfree isn’t risk free. The company, which still heavily invests in technology and research and development, is still losing money with DeSimone expecting the business to turn profitable in less than three years. He said as the company increases its customer count and transaction volume, that will help it “leverage” its costs.

Meanwhile, fluctuations in foreign currencies, which have hurt companies like Nike Inc. /quotes/zigman/235840/delayed/quotes/nls/nkeNKE, also could hurt its business. DeSimone said Borderfree outsources the management of its currency risk to a third party and said its involvement in 100-plus countries helps it diversify its risk. The company, which has seen strong growth from Russia, also hasn’t seen any impact from the latest crisis involving Ukraine, he said. He warned if U.S. implements broader sanctions that would prevent U.S. retailers from selling goods there, that could be a problem.

As for his pick for this year’s bright spot, he said customers in the Middle East, including Saudi Arabia and Qatar, are spending triple the amount of the average order of $250 it sees from overseas shoppers.

Story Conversation

About Behind the Storefront

Behind the Storefront is a blog about all things retail. It’s aimed at investors, shoppers and anyone else with a passion for learning about what drives consumer behavior. Hosted by Andria Cheng, Behind the Storefront will cover the business, brands and shopping behavior that’s behind some of the biggest companies, and largest employers, in the world. You can reach Andria at Acheng@marketwatch.com.